The ADR will meet the internal capital expenditure and investment requirements in its subsidiaries and associated institutions. The ADR has been created with the aim of reaching one per cent of the size of the RBI's assets within the overall target of 12 per cent set for the contingency reserve.

On the suggestion of its statutory auditors, the central bank has been pursuing a proactive policy for strengthening the CR and has accordingly set an indicative target of 12 per cent of the size of the bank's assets to be achieved in phases by year 2005, subject to review, if considered essential.

As on June 30, 1998, the CR and ADR together constituted 5.1 per cent of the balance sheet size against 4.5 per cent in the previous year. The ADR stands at 0.4 per cent of the total assets as on June 30, 1998.

The CR is maintained so that unexpectedand unforeseen contingencies can be absorbed. The RBI has been utilising the CR to strengthen the provisions meant for meeting depreciation on securities, exchange guarantees and risks arising out of monetary and exchange rate policy, which requires intervention by the RBI in the securities, money and forex markets. The CR is also used to meet obligations arising out of developmental functions devolving on the bank.

The balance in the CR has gone up to Rs 13,789.41 crore during the year ended June 30, 1998, from Rs 11,230.69 crore during the corresponding period last year. This was made possible by the transfer of Rs 2,558.72 crore to the reserve. The transfer includes an amount of Rs 400 crore representing unutilised balance transferred from the National Industrial Credit (Long-Term Operations) Fund and unclaimed items of credit written back during the year.